''Green'' chemistry developed at Rice University is at the centre of a new government effort to turn plant waste into fatty acids, and then into fuel.

The Rice lab of bioengineer Ka-Yiu San is part of a recently announced $25 million United States Department of Agriculture project to develop a new generation of renewable energy and bio-based products from switchgrass and forestry residues and from a new hybrid of sorghum being developed at Texas A&M University.

Patent-pending fermentation processes created by San and his colleagues use genetically modified E. coli bacteria to produce fatty acids from hydrolysates. The sugary, carbon-rich hydrolysate is extracted from cellulose, the tough, inedible part of plants that is usually thrown away. San said his lab already gets an 80-to-90 per cent yield of fatty acids from model sugars and hopes to improve that over the next few years.

''Adding another 1 or 2 per cent doesn't seem like much,'' said San, based at Rice's BioScience Research Collaborative. ''But when you're talking about making several million tons per year, it's huge.''

The target products are synthetic diesel and lubricants, according to Ceramatec Inc., a Utah-based company that proposed the project and would produce hydrocarbons from fatty acids that could then be processed by petroleum refineries.

There are two ways to make fuel (from biomass),'' said Mukund Karanjikar, innovation manager at Technology Holding LLC, which is administering the project. ''You either make alcohols, or you make petroleum-like fuels that can go into current infrastructure. Our program is for infrastructure-compatible transportation fuels.